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Week In Review – March 23, 2018

Volume 24, Number 11

Reginald J. Smith, Community Development Manager – Bank of Kansas City

Economic Highlights for Week Ending March 23, 2018

MONDAY, March 19th

News that a third-party firm amassed Facebook data without user permission is raising new questions over web privacy. Facebook fell 6.8% and took other web names with it as the Nasdaq lost 1.8% to 7,344. The Dow fell 1.4% to 24,610.

TUESDAY, March 20th

The Federal Open Market Committee is turning more hawkish, unsurprising considering the strength of the economy and the fiscal stimulus that is in the pipeline. The economy justifies higher interest rates and monetary policy offset and the Fed is planning on delivering. The FOMC raised the target range for the fed funds rate by 25 basis points to 1.5% to 1.75%, which was widely expected. The bigger event was the new economic and interest rate projections. The Fed revised up its forecast for GDP growth this year from 2.5% to 2.7% and anticipates growth to be 2.4% in 2019 (previously 2.1%). The Fed lowered its forecast for unemployment over the next few years. This was the first of three expected rate cuts this year.

WEDNESDAY, March 21st

The MBA mortgage applications index fell 1.1% for the week ending March 16. The decline was led by a 4.5% drop in the refinance index while the purchase index increased by 1.4%. Contract mortgage interest rates are holding onto recent highs with the 30-year fixed rate for conforming mortgages up just 1 bps to 4.68%.

Existing home sales regained some lost ground in February, increasing 3.0% to annual pace of 5.540 million following a drop of 3.2% in January to an annual pace of 5.380 million. With last month’s gain, existing home sales are now trending a bit higher, and are up 1.1% over the past year. Regionally, sales fell 12.3% in the Northwest and 2.4% in the Midwest while gaining 6.6% in the South and 11.4% in the West. The inventory of homes available for sale increased 4.6% on the month to 1.590 million which represents just a 3.4-month supply at the current sales pace. However, inventories remained down a sharp 8.1% on the year. Clearly, such low supply on the market is constraining sales and lifting prices. House prices continued to move higher over the past year as the median price for an existing home gained 5.9% in February to $241,700 from February 2017. NAR chief economist, Lawrence Yun said The very healthy U.S. economy and labor market are creating a sizeable interest in buying a home in early 2018. Yun went on to say, However, even as seasonal inventory gains helped boost sales last month, home prices especially in the West shot up considerably. Affordability continues to be a pressing issue because new and existing housing supply is still severely subpar.

THURSDAY, March 22nd

Jobless claims rose 3k to 229k for the week ending March 17. The four-week moving average rose 2,250 on the week to 223,750. The labor market remains strong and joblessness remains low.

FRIDAY, March 23rd

New home sales slipped 0.6% in February to an annualized pace of 618k following a decline of 4.7% in January to an annual pace of 622k. New home sales have leveled off the last couple of months after an outsized drop in December to leave February new home sales up 0.5% from February last year. Regionally, new home sales were mixed with declines of 17.6% in the West and 3.7% in the Midwest while surging 19.4% in the Northeast and 9.0% in the South. The inventory of new homes available for sale rose 2.0% in February to 305k which represents a 5.9-month supply at the current sales pace. Supply is in the normal range which hopefully will bring some relief to inventory shortages in the resale market. New home prices shot higher over the past year with the median price for a new home up 9.7% in February to $326,800 from February 2017. Given incoming supply and room for prices to move even higher, the outlook for new home sales remains positive for 2018, despite recent declines. The housing market is expected to remain a positive contributor to GDP growth this year.

Stock Market Close for the Week

Index

Latest

A Week Ago

Change

DJIA

23,533.20

24,946.51

-1413.31 / -5.67%

NASDAQ

6,992.67

7,481.99

-489.32 / -6.54%

WEEK IN ADVANCE

After a week of mostly housing market related data, reports in the coming week wrap up the sector for the month. Watch for new home sales and pending home sales, both on next week’s calendar.

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